Discussion paper

DP466 A Chaotic Monetary Model of the Exchange Rate

Paul De Grauwe Hans Dewachter

1 Oct 1990

We use a monetary (Dornbusch) model of the exchange rate and introduce speculative dynamics, in which fundamentalists and chartists interact. The resulting non-linearities in the model produce `chaotic' behaviour of the exchange rate. We also analyse the effects of money-stock surprises in such a model. Finally, we study the behaviour of the exchange rate when `news' occurs infrequently.

£6.00

Citation

De Grauwe, P and H Dewachter (1990), ‘DP466 A Chaotic Monetary Model of the Exchange Rate‘, CEPR Discussion Paper No. 466. CEPR Press, Paris & London. https://cepr.org/publications/dp466